How to Calculate Home Equity Line of Credit Interest

by HomeLoan.com

A home equity line of credit is a type of loan in which the borrower uses their house as collateral. Home equity lines of credit are convenient because they allow homeowner's to borrow cash against their house as needed, much like with a credit card. Calculating the interest on such a loan is not any more difficult than calculating the simple interest on any other type of loan.

Things You'll Need

Bill for your home equity line of credit loan

Calculator

Step 1

Determine the interest rate on your home equity line of credit loan. This should be clearly displayed on your loan bill. The interest rate should be given as a percentage.

Step 2

Convert your interest rate percentage to a decimal. To do this, divide your interest rate by 100. For example, if you interest rate was 9% you would divide this by 100 to get 0.09. We will call this number your "interest rate decimal."

Step 3

Determine the current balance on your home equity line of credit loan. This should be written on your bill beside your interest rate percentage.

Step 4

Multiply your loan balance by your interest rate decimal (step 2). The resulting number is the amount of money you would be charged per year in interest if your principle balance remained the same.

Step 5

Divide the amount of interest per year (step 4) by the number 12. The resulting number is the amount of money that you were charged this month for interest alone.